Challenges in Rural Connectivity for India

Transcription

1 Challenges in Rural Connectivity for India Prof Ashok Jhunjhunwala IIT Madras (Published in the ASCI Journal of Management 31 (1&2), 40-47) Internet is Power India now has more than a billion people. It has, however, only 40 million telephones and three million Internet connections. Further, as these are mostly concentrated in the urban areas, the rural areas are getting left behind as the world races towards an information-led global economy. The last few years have shown, more clearly than ever, that the telephone and the Internet are no longer merely a means of communication; they represent power. Electronic information now yields millions of rupees, provides employment, training, healthcare and education [amongst many other things] to hundreds of thousands of people as well as helps to build the economy of a nation. India has less than three million Internet connections today. Lack of access to the Internet is going to create strong divides within India. For a nation that has a 740 million strong rural population that currently has a rural GDP of Rs 600,000 crores, it is time the information revolution carried over to the rural areas. It has thus become imperative to connect the villages with each other and to the outside world at the earliest. Telecom Affordability for Indian Households The first aspect to study, of course, is why there hasn t been large-scale spread of telephony thus far. Till around two years ago, a telephone operator had to spend around Rs.30,000 a line as infrastructure cost to provide telecom services to a subscriber. Taking into account finance charges on the investment (15%), depreciation (10%), and operation and maintenance cost (10%), an operator needed at least 35% of the initial investment as yearly revenue just to break even. Add to this the license fees and taxes, and the revenue per subscriber needed to be at least Rs.1000 a month. Now, what percentage of Indian households could afford this? Fig. 1 provides the percentage of Indian households that could afford telephones and Internet (assuming 5% of their household income is spent on communications) at various levels of investment per line. If the investment was more than Rs.30,000, barely a few percent of homes can afford it. But if one could reduce this cost to about Rs.10,000 a line, the affordability would go up to almost 50% of homes. The 200 million connections would then look definitely achievable. The key was whether one could reduce the cost per line to Rs.10,000.

2 Fig.1: Telecom Affordability for Indian Households at different Network infrastructure costs A more detailed look at the cost of telecom and Internet networks around the world reveals that in the West, the cost of providing a telephone line is around $700 (Rs 35,000). We use the same technology and it is not surprising that our numbers are similar. But this cost of $700 was reached in the West more than a decade ago. There too, an operator needs between 35-40% of initial investment as yearly revenue to break even. However, this amounts to barely $30 (Rs 1,500) a month and is affordable to over 90% of the homes. Therefore, homes in the West have been fully wired up quite some time back. Now, reducing the cost further, no longer expands their market. Their R & D focus has therefore naturally shifted to service the replacement market, where more and more features and services need to be provided rather than lower cost products. It became obvious that if India needed to cut down the costs of installing a telephone line, the R&D would have to be driven from within the country, focused on cost reduction rather than addition of features keeping the cost constant. Indian scientists and industry would have to come together to provide the resources and the drive to design and deploy low cost technology that best caters to Indian conditions. Technology Development Efforts TeNet (Telecommunication and Computer Networks) Group, a group of faculty members from IIT Chennai, have a vision of widespread connectivity in India and with all the villages in India connected at the earliest. Towards this, they first took up the technology development task. A technology had to be developed which would not only be low cost, but require low initial investments to install. To carry out such a task, the TeNet Group needed people who were experienced in the workings of the industry. It therefore got in touch with some of its alumni and incubated a company called Midas Communication Technologies Pvt Ltd. The thrust of this joint effort between IITM and Midas was largely on products that could be deployed effectively throughout India. Before taking up the technology development task, one started examining the kind of connection that would be required to truly maximize the presence of Internet in India. It was found that at least 28.8 kbps dedicated Internet to each connection enabled effective video conferencing, remote education, agriculture, commerce and so on. A 64 kbps connection would be much better and truly empower rural areas.

3 The team then grappled with issue of coverage with respect to distances. BSNL already has about 25,000 Rural exchanges, with 75 % connected on fibre. Total area covered by rural India being 2,761,300 sq km, on the average one fibre connected rural exchange caters to 150 sq km. Thus, on the average a 7 km radius around an exchange would cover most rural areas. A wireless system with 10 km range, if installed at existing fibre connected exchange would cover 80-85% of villages in India. States like Assam, Bihar, Haryana, Punjab, TamilNadu, UP Jharkhand and W. Bengal have over 300 people per sq km in their rural areas. Andhra Pradesh, Gujrat, Karnataka, Maharashtra, Orissa each have people per sq km. Therefore a system that will connect 10 km radius would serve at least 80,000 persons in most rural areas. Assuming the need for one Internet connection per 500 people, roughly 150 connections would have to be served by base stations in an exchange area. Thus the base structure and exchange has to be cost effective even if only 150 connections are deployed in an area. cordect WLL: TeNet Group along with Midas developed cordect Wireless in Local Loop (WLL) to meet such a requirement. This gives to a subscriber a fixed wireless connection (not mobile) at home or office, providing both a telephone as well as a 35 kbps Internet connection at the same time (alternatively a premiere service at 70 kbps), as shown in Fig 2. The connections can be provided at 10 km distance from the base station directly, and in a 25 km radius using a Relay Base Station (RBS). The equipment can be installed at a low initial investment (about Rs.2 million) and provide service to about 1000 subscribers in a neighborhood. The per line cost amounts to under Rs.12,000 a line (including about 30% taxes). One key feature of this system is that while it provides simultaneous telephone and Internet connection to subscribers, the Internet traffic is separated at the exchange from voice traffic and carried separately so that telephone network does not get congested. The system is being deployed in India by BSNL, MTNL and at least three private Basic Service Operators. It has also been deployed in countries like Argentina, Brazil, Egypt, Madagascar, Kenya, Nigeria, Iran, Thailand and Fiji.

4 Rural Deployment cordect system was first deployed in rural areas in February villages in Kuppam Taluk in Chittor District (state of Andhra Pradesh) were connected in 25 km radius around taluk town. The technology trial demonstrated the ability of cordect to provide not just telephone but reasonable speed Internet (35 kbps or 70 kbps) in each village. In spite of this demonstration, the operators were slow to pick up the deployment in rural areas. It dawned upon the TeNet Group that existing operators (BSNL or private BSOs) had very little interest in connecting rural areas. The teledensity requirement was too low for operators to consider it as a profitable business. Their business plans and choices were entirely based on connecting dense urban areas. Even if regulatory obligations forced them to go to rural areas, they would protest, ask for subsidies and then go ahead and put the minimum connections in villages. Their hearts and minds were not there in rural areas. The situation was very similar to that with respect to FMCG goods till the mid eighties; before Hindustan Lever made rural areas as its rich and prime market, no one believed that such` goods could be sold in rural areas. n-logue Communications The TeNeT group thus decided to help create an operating company focused on rural areas. They helped set up n-logue Communications Pvt. Ltd., with a charter to provide and operate telecom and Internet services in small towns and rural areas of India. The company would not carry out operations in urban areas, thus preventing dilution of its focus. The company s belief is that there is a large rural market in India for such services, though it has to be tapped differently from that in urban areas. n-logue s vision is to significantly enhance the quality of life of every rural Indian by driving the digital revolution. It thus recognizes that there is a strong need for such connectivity and the potential to significantly change the lives of rural people. It also recognizes that the movement has to be service driven and n-logue has to take total responsibility for not just connectivity, but also for back-up power, access terminals and high quality service with relevant content and applications. Micro-economic Entrepreneurship The company s business model is scalable and sustainable and it is aimed at finally providing profit to its investors. It is based on two success stories of India STD PCOs and cable TV. When telephones were not affordable to individual homes, PCOs in India brought telephony to urban, middle and lower middle classes. These Public Call Offices [PCOs] were owned by small entrepreneurs, who sat at the booth, and provided services for more than 18 hours a day, 365 days a year. Today there are over 900,000 such PCOs, and almost 25% of the total telecom revenue in the country is generated by them. Similarly, the cable television boom over the last few years to nearly 50 million subscribers over just 10 years is phenomenal. The first reason for such rapid growth is simple economics. While a cable connection in India costs only about Rs.100 a month, the cost in the U.S. for a similar cable connection would be over $30 (Rs. 1500) a month. Cable TV has been made affordable to over 60% of Indian households. The second reason for this rapid growth is the nature of the organisation that delivers this service. Cable TV operators are small entrepreneurs (at least when they start providing service). They put up a dish antenna and string cables on poles and trees to provide service in a radius of 1 km. The operator goes to each house to sell the service and collects the bill every month. He/she is available even on Sunday evening if any repair is

5 needed. This level of accountability has resulted in less-trained people providing better service using a far more complex technology, than that used by better-trained technicians handling relatively simple telephone wiring. However, what is even more important is that such a smallscale entrepreneur incurs a man-power cost several times lower than that in the organised sector. Such lower costs have been passed on to subscribers making cable TV affordable. Building on this enterpreneurship model, n-logue plans to provide a telephone and Internet kiosk in every village. Each kiosk would be operated by a local entrepreneur, (very much like a STD PCO operator) who offers a variety of services to the villages. The kiosk consists of a cordect wallset with its accessories, a telephone and a telephone meter, a multimedia personal computer, power back up, camera, speakers, printer and Indian language software, and is made available to the entrepreneur at a total cost of Rs 50,000. As bank loans and government assisted schemes to promote rural entrepreneurs are available, the kiosk operator need to come up with above Rs. 15,000 to set-up a kiosk. Once set up, the kiosk operator provides three services, i.e telephony services, stand alone computer services and Internet services. These services together makes it easier for the operator to break even. Telephone Backbone Application & Content Providers Internet Backbone Banks ACCESS CENTRE LSP Scope: 1 3 Talukas 25 Km radius 4 5 lakh population 2-5 towns Connections: Individuals Government Schools and PHCs Kiosks KIOSK OPERATOR Banks Micro Finance Organisations Fig 3: n-logue Deployment Strategy

6 For operational purposes n-logue divides the country into service areas (operation unit) corresponding approximately to a taluk (or county) with a radius of about 25 kms. Fortunately, 85% of taluk headquarters in India has optical fibre today, which can provide the backbone for telecom and Internet connectivity. n-logue sets up Access Center (consisting of cordect exchange, or DIU and Base Stations) at this town to provide wireless connections in a 25 km radius (using Relay Base Stations as required). The 2000 sq. kms that the Access Center covers typically has 300 to 400 villages in most areas in the planes of India. n-logue plans to provide at least 500 connections in this area to individuals, governments offices, schools, public health centers, and at least one kiosk operator in every village. Learning from the cable-tv revolution in India, the n-logue business model arranges partnering with a local business for each of the Access Center. This local business person needs to make an investment of the order of Rs 12 lakhs and becomes a 50% partner in the venture. It is the local business person, termed as Local Service Provider (LSP) who carries out the operation of the Access Center, finds subscribers and connects them, maintains each connection and collects the telephone and Internet charges. n-logue, besides investing and providing the equipment, provides training and stands behind the LSP and drives the business relationship with content providers. The LSP, like a cable TV operator, is a local small entrepreneur, who can provide better face-to-face service in rural areas. To break even, n-logue has assumed only Rs. 25 per day of revenue from telephone call charges and Internet access charges from each of the 500 kiosks being served by an Access Center. The key is to keep the operating cost as low as possible, and partnering with the LSP ensures not only better service to customers, but also lower operation costs. Application Development During implementation, one quickly realized that the key to success is not just connectivity, but availability of relevant Internet content. n-logue is not a content provider, but ties up with a range of content providers. In every state, it ties up will the state government to drive e- governance applications, so that rural citizen can access the government services from the kiosks. It ties up with the rural development ministry to push programs for rural development, and the agricultural ministry to bring agricultural services to the farmer. It also ties up with fertilizers and pesticide manufacturers, farm machinery manufacturers, and businesses that procure agricultural produce, not only to enable commercial activity, but also to provide training. It is attempting to bring to the rural areas all kinds of education and training using these kiosks and would work to enhance provision of health services and veterinary services to people. It works with NGOs to enable rural people access all kinds of micro finance and banking services. It would tie up with insurance companies and FMCG companies to access rural markets using Internet services. But above all, n-logue hopes to bring jobs and services to rural areas. A person with a computer and an Internet connection can do remote jobs for those in cities and even if few such jobs can be created in each village, it would make a significant difference. All this has to be, of course, done largely in the local languages. TeNeT group has promoted a company, Chennai Kavigal which has developed a complete office package consisting of word processing, spread-sheet, database, mail client, browser and a drawing package in a few Indian languages. Other Indian languages will be incorporated shortly. It provides the package to n- Logue for deployment in rural areas at a very nominal price. TeNeT group is working to make the PCs in these kiosks work on Linux open-source platforms and is driving a number of applications.

7 n-logue has already started operations and have already deployed several Access Centers and is expanding rapidly. Soon the connections would be available in several districts including Nellikuppam and Madurai in TamilNadu, Dhar in M.P., Sangrur in Punjab, Baramati in Maharastra, Shahpura in Rajasthan, Agra district in U.P. and a few districts in Andhra Pradesh and Karnataka. N-Logue plans to step up its operation to a taluk a day, so that each day one taluk could be made operational. Sparse Area Communication Systems n-logue s above approach is based on the fact that BSNL has brought fibre upto taluka level in 85% of the country. n-logue then takes the connectivity further into the villages. About 80% of Indian villages can be covered in this manner. However, it would be difficult to cover the remaining villages using this model. The remaining 15% of India, for which fibre does not reach the taluk level, or areas are hilly, and the terrain rough, alternative methods of connectivity are being worked on. Satellite backhaul with two-way 64 / 128 / 256 kbps dedicated digital satellite links to carry 8-10 voice and 64/128 kbps Internet could then connect to a cordect mini-access centers to support about 100 telephone and Internet connections in an area. The cost would go up by about Rs 10,000 per line. TeNet group is working along with ISRO to make this possible. Some kind of support will be required to make kiosks work in such areas. But if one is able to do this, one would integrate the most backward areas of the country into the mainstream economy. PSTN Internet 3.8 m 2.4 m Kms with voice channels + 64/128 kbps Internet satellite backhaul Each hub supports 16 to 20 remote sites with 2 Mbps downlaod Fig 4: Sparse Area Communication System

8 Conclusion Rural India with its population of more than 700 million people and a GDP of over Rs 600,000 crores is ripe for progress, representing enormous potential in terms of economy and human resources, and connectivity is the key to harnessing its resources. Suitably equipped, it may well be the catalyst in thrusting India to be one of the most powerful nations of the 21 st century.